Delay to pension charge cap confirmed

Category:
Pensions

Updated:
24/01/2014
First Published:
24/01/2014

MONEYFACTS ARCHIVE

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Yesterday pensions minister Steve Webb confirmed that the cap on pension charges would be delayed for at least a year, saying it was only right that the Government give employers at least 12 months' notice of any change.

The cap was originally intended to be brought in this April but, speaking at the Confederation of British Industry Pensions Conference, Mr Webb said it had been pushed back so as not to interfere with auto-enrolment staging. This means the cap will now not be implemented until at least April 2015, although he's said that he remains committed to tackling high charges – which in some cases can strip thousands of pounds off the value of a pension.

He had been previously criticised for trying to rush through these pension cap changes, particularly at a time when a lot of businesses would be getting to grips with auto-enrolment, so the announcement that it will be delayed has been welcomed by a lot of industry experts.

Currently it's still unclear what form the cap will take, although three possible systems have been proposed: a 0.75% cap, a cap at 1% or a two-tier "comply or explain" model. As it stands, some older schemes can charge as much as 2.3% which could add up to a huge amount of pension income being lost, so a cap on charges could be good news for many scheme members.

Richard Eagling, head of pensions at Moneyfacts, said:

"The decision to delay the cap until April 2015 is a sensible compromise. There were real fears that introducing a cap on auto-enrolment pension charges this year would have undermined progress by creating uncertainty for the thousands of SMEs preparing to stage. Hopefully, the delay will not see the Government's desire to protect individuals from being enrolled into schemes with high charges waver."